I'm wondering what's holding them back. There would be very little appetite left in America for another war - Trump has used all that capital up - plus laid down a precedent for first-strike invasions ...

The Chinese economy would definitely take a serious hit, so they have to consider that. But at this point, I think the world would give China a pass if it blockaded Taiwan on the premise that it has information that bad actors in the West (i.e., the Trump government) are orchestrating a massive attack of some sort on Taiwan to take over its chip industry. As you point out, the US has demonstrated that it will attack anybody without warning. The US is now a warmongering, pariah country and, as China would argue, we need to protect ourselves and our compatriots in Taiwan.

In fact they could frame it as if they're doing the world a favor. They're taking the bullet by bravely protecting this internationally vital industry from an imperialist aggressor.

Only thing i can think of is China's air defense systems sold to Iran were proven to be not up to snuff, hence the military purge by Xi?

They no doubt have learned a lot from these wars and made appropriate improvements to their wares!

On the other hand, CCP taking control of global chip manufacturing may be enough to force US to defend Taiwan. It could, by the same logic Palantir expounds, be a war they can't afford to lose.

The US can't defend Taiwan. They can't even maintain supply lines in their war on Iran.